Availability Of Early Retiree Reinsurance Program Ends In May 2011

Hidden in a mini-tsunami of recent regulatory guidance on health reform (see Regulation Alert below), is a notice scheduled to be published in the April 5 Federal Register that acknowledges the clear success of the Early Retiree Reinsurance Program (ERRP):

The Centers for Medicare & Medicaid Services (CMS) will stop accepting applications for the ERRP on May 5, 2011. CMS has projected the availability of program funding based on the rate at which appropriated funds are currently being used to reimburse plan sponsors, and the agency has concluded that a sufficient number of applications have been approved to exhaust the program funding. Critics of health reform likely will point to the end of the program as another signal of failure, despite the following:

As of March 17, 2011, approximately 5,850 applications, submitted by nearly 5,400 plan sponsors, have been approved for the program. These applications represent a variety of for-profit companies, schools and other educational institutions, unions, State and local governments, religious organizations, and other non-profits.

So far, program reimbursements provided to more than 1,300 participating organizations total nearly $1.8 billion. ERRP funds disbursed so far have been used to reimburse expenses of covering over 100,000 individuals who have each incurred health plan costs that exceed the program’s $15,000 threshold.

Some sponsors have already applied ERRP funds to reduce costs for plan participants. For example, CalPERS, the California Public Employees’ Retirement System, requested reimbursement for claims incurred by 5,302 early retirees, spouses, surviving spouses, and dependents in 2010. In anticipation of ERRP reimbursement CalPERS worked with its benefits carriers to mitigate 2011 premium increases by three percent – a savings of up to $200 million. According to CalPERS officials, the ERRP funding will directly benefit 1.1 million public employees, retirees, and their dependents including 115,000 ERRP eligible early retirees, many of whom have been subject to declining wages due to state furloughs imposed to address budget shortfalls.

What Now

Applications were first accepted for the ERRP on June 29, 2010, and therefore, plan sponsors have so far had nine months to submit applications. As a result of CMS notice, any program applications that CMS receives after May 5 will not be accepted for processing.

Any final applications to the ERRP must be received in the program’s Intake Center on or before May 5, to be accepted for processing. A copy of the application, as well as information on how to complete and send it, and where to send it, can be found on http://www.errp.gov.

Although applications will be accepted, the ERRP Secure Website (SWS) will be unavailable due to system updates from 7:00 PM ET on Thursday, March 31 through approximately 8:00 PM ET on Sunday, April 17.  See News, Apr. 1, 2011, Claims Lists Required For Each Reimbursement Request Under Early Retiree Program)

CMS has not closed the door completely on ERRP. The decision to no longer accept applications is based on the actual availability of remaining appropriated ERRP funds and the rate at which CMS has been disbursing reimbursement, as opposed to the projected amounts of ERRP reimbursements that applicants listed in their ERRP applications. According to CMS, “Should circumstances related to the availability of ERRP funding change, CMS may decide it is appropriate to resume accepting ERRP applications.”

Health Reform Regulation Alert

IRS Notice 2011-28, Interim Guidance On Reporting Cost Of Employer-Provided Health Care

Proposed Rule, Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations

Text, IRS Notice 2011-20, Accountable Care Organizations

Notice: Waiver Designs in Connection with the Medicare Shared Savings Program

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.